The Executive Board of the International Monetary Fund (IMF) completed today the second review of Jordan's performance under a two-year SDR 85.28 million (about US$126.26 million) Stand-By Arrangement. The arrangement, which was approved on July 3, 2002 (see Press Release No. 02/31), is being treated by the Jordanian authorities as precautionary and is not intended to be drawn upon given the strength of Jordan's external position.

In completing the review, the Executive Board approved a waiver of applicability of the end-March 2004 performance criteria.

Following the Executive Board's discussion on Jordan, Anne Krueger, Acting Managing Director and Chair, issued the following statement:

"The Jordanian economy, supported by generous financial support from the international community, showed strong resilience in 2003, despite the negative effects of the war in Iraq. The authorities should be commended for their continued commitment to prudent macroeconomic policies and far-reaching structural reforms, which has resulted in strong export growth, low inflation, higher investment, and a surge in international reserves.

"The fiscal adjustment in 2003 is commendable, particularly as it came against the background of strong capital- and security-related spending pressures following the war in Iraq. Going forward, the authorities plan to sustain their fiscal adjustment efforts, accelerate privatization, and utilize privatization proceeds solely for debt reduction purposes, so as to meet the debt ceilings mandated for 2006 under the Public Debt Law.

"Substantial export growth, the stronger reserve position, and the positive balance of payments outlook suggest that the Jordanian economy remains competitive, and that the fixed exchange rate regime has served Jordan well.

"The banking sector in Jordan is basically sound, and the regulatory and supervisory framework generally observes international standards and codes in banking, payments systems, securities, and insurance. The authorities should effectively implement their new time-bound corrective action framework to deal swiftly with the remaining few undercapitalized banks.

"The recently completed reforms of the military and the civil service pension systems were essential steps toward fiscal consolidation over the medium and long term. The improved economic outlook has enhanced the scope for accelerating the privatization program, and the recently launched privatization of the electricity sector is a welcome step in that regard.

"The authorities have demonstrated a strong commitment to prudent financial policies and a solid record of policy implementation. Given the strength of the external position, the authorities' intention not to make the purchase associated with the completion of this review is appropriate, and consistent with their intention to graduate from a series of Fund-supported programs following the completion of the current Stand-By Arrangement in July 2004," Ms. Krueger said.